Growth in the Canadian recreation business, progress in strategic units, and improving profitability metrics are some of the reasons why Canopy Growth Corp (NYSE:CGC) has powered to one year highs. The stock has erased all the losses accrued in the first half of the year after an impressive third quarter, depicted by record revenues.
Expansion Drive
The company is coming off a record-breaking quarter helped by a renewed focus on winning new customer mindshare and execution of growth strategy. According to the Chief Executive Officer, the company is well-positioned for continued growth, having established a strong leadership position. Canopy growth boasts of a vast portfolio of differentiated brands and products, including cannabis-infused beverages.
The cannabis legalization drive in the U.S continues to work in favor of Canopy Growth, which is increasingly expanding its footprint in the country. In addition, the company is looking to strengthen its footprint with new cannabis beverages as it moves to close a deal for the acquisition of U.S multi-state operator Acreage Holdings. It is also looking to ink strategic partnerships for the launch of its drinks in Illinois and California.
Improving Financials
Likewise, the company is poised to see a massive margin expansion supported by top-line growth and cost improvement. Revenues in the recent quarter came in at $102 million, representing a 76% year over year increase. However, the company lost $24 million in the quarter attributed to the increased expenditure on launching new products and beverages as well as expanding into new markets.
The rate at which revenue is increasing continues to affirm the company’s path to profitability. In addition to revenue growth, management has embarked on a cost-cutting drive that continues to strengthen the bottom line. More cost savings are in the pipeline, with the company planning to trim between $150 and $200 million on the cost of goods sold, SGA expenses, and inventory.
The enormous revenue growth can be attributed to, among other things, the company gaining traction in the burgeoning Canadian recreation market. The company’s market share in the segment increased to 15.5% representing a 200 basis points increase.